Thursday, March 26, 2009


Mark my words, this wave of chapter 11 filings that we are currently riding will be marked by all the companies being sold or liquidated. It will not be marked by reorganizations like the last wave of bankruptcies from 2000-2003.

Dial-A-Mattress, according to this NY Times blog, is being sold to Sleepy's. In order to effect the sale, Sleepy's is providing the DIP financing. I expect this scenario to play itself over and over in 2009. The lack of DIP financing from third parties and unpredictable short-term revenues are forcing more and more companies to liquidate or to be sold in whole or in parts instead of reorganizing.

The traditional process of restructuring the operations and then the balance sheet, lacks the financing and it lacks the visibility of the near-term sales levels. As a result, in an effort to avoid liquidating or a piecemeal sale, more companies are disclosing the risk of a chapter 11 filing earlier than ever before according to the WSJ.

Cheers, Mike

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